The flood of Chinese corporates expanding overseas continues thanks to ongoing economic growth and a spate of national policies that encourage the push abroad, not the least of which is the Belt & Road Initiative. Following all these corporations abroad are Chinese law firms, which are expanding their footprints to match those of their clients. 

“We are seeing quite a few local law firms expanding overseas. Most of them have established offices in Beijing or Shanghai first as those cities are where most of their international clients are. Those first-tier cities serve as a springboard to expand overseas,” says Zhang Zhaohui, a lawyer at Zhonghao Law Firm. 

“Eastern China has quite a few international law firms because that’s where most IPO and high-value transaction cases are. Sometimes they team up with lawyers in the U.S. or UK to provide overseas legal services to those who need it, and those connections can lead to further expansion,” she adds.

To keep up with the growth of work outside of China, Broad & Bright Law Firm is doing what other prominent firms are doing and opening offices abroad. Broad & Bright has already set up an overseas branch in Tokyo and another in Los Angeles, in the United States. The firm has also worked to form close partnerships with local law offices in both South Korea and Singapore, two places where Mainland China companies are rapidly growing. 

“Before, we were mainly helping Japanese enterprises investing in China. Since last year, we have seen a sharp increase in Chinese companies coming to us to help them enter Japan,” says Zhu Taotao, partner at Broad & Bright Law Firm. 

COMPANIONSHIP AND SUPPORT 

The presence of Chinese law firms in overseas markets plays an important role in the global expansion of the country’s corporate sector by providing companionship and support, because when investors go out of their home countries and their comfort zone, they need someone who they trust to help them solve problems, sometimes before they even become problems. 

Chengdu-based Tahota Law Firm launched an office in the U.S. capital of Washington, D.C., in January 2016 after stepping into Hong Kong earlier. 

The new office’s primary task is to serve its Chinese clients investing in the U.S., according to Cheng Shoutai, chief partner of the firm. 

“It is more convenient for our Chinese companies running businesses in the US to get legal advice from Chinese law firms’ overseas branches because they are familiar with both legal systems in both the US and China,” says Cheng. “There are huge differences between the legal framework of the US and our Chinese legal framework, especially in tax and labor regulations. Without professional views from law firms, it will be tough for Chinese companies to operate successfully in the US.” 

The Washington branch specializes in international trade disputes, FDI, M&A and capital markets. 

“Chinese law firms lack sophisticated lawyers who are qualified in both the US and China; this is one of the obstacles for many Chinese law firms which have not established an overseas branch,” he says. 

The managing partner of Tahota Washington Law Firm, Cheng Shaoming, has the unique experience to overcome such obstacles. He was born in Yunnan province and graduated from the Southwest University of Political Science and Law in Chongqing, but has over 20 years of experience practicing law in the U.S. 

Beijing-headquartered Yingke Law Firm opened a Mongolia branch office in June, the 34th overseas office it has opened in the last six years. And the firm is now getting ready to launch offices in France, Canada and Australia. 

“In 2010, the strategy of Chinese companies going abroad was not in full swing like it is now. However, we saw that internationalization was the inevitable trend and started to prepare and established Yingke Varna, our first oversea office in Budapest, Hungary,” says Yang Lin, a global partner at Yingke, director of Yingke International and executive director of the Yingke Global Board of Directors. 

In a little more than half a decade, Yingke has worked with multiple Chinese companies that have kicked off overseas expansion plans or expanded their presence abroad, including some top tier companies like CRRC Group, Zoomlion and Xuzhou Construction Machinery Group. 

Good lawyers with experience in Mainland China and abroad can bring significant value to their clients, says Yang. 

“One of our clients is a state-owned company. They were trying to form a joint venture with a local firm in Turkey. It started with a bumpy negotiation as the two parties had disputes regarding management culture and values. We worked as the lubricant to smooth the conversation and helped them reach an agreement,” Yang recalled. “For companies seeking overseas investment, what they are looking for from law firms are more than just legal consultants. The bridge we built between Chinese investors and overseas market is very critical.” 

MUTUAL RESPECT 

Cooperation between Chinese investors and their foreign partners is a lot like an international marriage that can only end well if both sides respect each other. A happy ending is only possible if both sides respect each other’s habits and values. For example, decision-making in Chinese companies is usually top-down. In practical terms this can mean that an investment plan only kicks off when the chairman signs off on it. At many foreign enterprises, the system can be more diversified and well-regulated but also more time-consuming. In broad strokes, Chinese investors often prefer to move faster, believing time is money. 

On the other hand, Chinese lawyers often find that local lawyers can draw a better and clearer picture of the local regulatory environment and the behavior model of companies. 

The way Yang sees it, a “right local partner with whom there is chemistry” is essential for Chinese law firms helping investors overseas. 

“Most of our partners at destination countries are not those largest ones locally. We choose to work with middle-sized law offices with a particular purpose,” says Yang. “A majority of our clients are state-owned companies. What they need is flexibility, which large firms usually do not have.” 

The budget process is an example of how this plays out. SOEs are often required to submit very detailed budgets that can only move forward after getting approvals from specific officials. Unfortunately, large law firms calculate their fees on an hourly basis and cannot provide flat fees. 

“We cannot ask our clients to change their systems. What we could do is to find a foreign law firm that fits our clients’ requirements as our local partners,” notes Yang. 

Looking forward, many Chinese law firms have plans to hit more foreign markets. The idea of going abroad has long been considered a good one for Chinese companies. 

“Recently, we see it moving from a concept to practice,” says Yang. “We see a further boom coming later as more private companies, as well as SMEs, are ready to dip their toes in this pool as well.”

“We will catch the wave and ride it. Wherever our clients are interested in, for example, Europe and the Middle East, we will brave into. It definitely will drive us to expand to more foreign markets.”